Budgeting Guide for Low Income Families

With the cost of living rising day by day, it is harder for low-income families to cover basic needs like food, rent, and bills till the end of the month. But with the right planning and budgeting strategies, you can manage your money better and achieve your goals. You can even save some more for emergencies, and build a safer future. 

In this article, we will break down the best Budgeting Tips for Low-Income Families to follow under this step-by-step guide.

Understand Your Income

The very first step for budgeting, especially for low-income families is to understand the income in detail and this includes:

• How much money you earn monthly after all the taxes and deductions.
• Listing all the sources of your income, such as your salary, your part-time job, government aid, and other small extra income. 
• Write down every source of income, even small ones and check if your income is constant or changing.
• Comparing your total income with your total monthly expenses excluding the unnecessary things.

Track Your Spendings

After getting a clear idea about your income, you need to track your spending by keeping a record of where your money goes. You can simply write it down in a diary or you can even use a free budgeting application. Include everything such as:

• Rent or mortgage payments, which is your monthly fixed housing cost.
• Utility such as electricity, water, gas, internet, and phone bills. 
• Transportation and fuel cost if you have a vehicle.
• Groceries 
• Entertainment and dining out. 
• Insurance like health, house, life, or car insurance. 
• EMI, credit card bills, or personal loans. 
• Childcare and school supplies

After making a list of all these things, it may surprise you in a good or bad way, but it is a really important step because people often don’t realize how much they spend.

Separate Need From Wants

Once you tracked down all your expense, separate needs from wants and divide them into two categories:

• Needs: Important things like food, bills, groceries, transportation, and childcare. 

• Wants: Non-essential things like eating out, entertainment, and impulse shopping.

This helps you plan your budget according to needs over your wants and you can easily cut the unnecessary things from your wants, which leads you to spend extra. 

Create a Simple Budget

Now you can finally create a simple budget. For this you can use the 50-30-20 money saving rule. 

• Monthly Income: If your income is supposed to be $3000 per month. 
• Expenses: Now you can spend your 50% expenses i.e., $1500 on needs like food, bills, groceries, transportation, childcare, and other important stuffs

You can use 20% of the remaining amount for your savings and debts and 30% on your needs like entertainment, shopping and dining out. 

Build an Emergency Fund

No matter how small the amount is, try to save that money for an emergency fund. Because you never know what may surprise you in future and in those situations you need money on the spot. To avoid those situations you need to: 

• Avoid spending money on unnecessary things like soda, coffee, and snacks. 
• Save loose change or cash tips. 
• Pay off loans and credit card bills on time to avoid interest rate for next month. 
• Avoid eating out and ordering food from outside. Try to cook at home and bring your own tiffin box to the office. 
• Use refunds and extra income of savings. 

Don’t forget to put all your extra savings money in a separate savings account, so that it stays safe and secure and you won’t be able to use that money for your daily use. 

 

Look for Ways to Cut Cost

For low-income families, some practical methods to cut cost on your spending are:

• Make a limited shopping list according to your needs and stick to that list to avoid impulse buying. 
• This might sound silly to you, but eat something healthy at home before you go to the supermarket, because there are lots of items which may tempt you to buy. 
• Buy your groceries in bulk to avoid extra spendings on little things. 
• Cancel unused subscriptions and memberships. 
• Use coupon codes and cashbacks to get discounts in online stores. 
• Switch to generic brands because usually their quality is the same as branded one. 

These practical tricks add up more to your savings and you can easily save money. The thing is, you just need to be smart about every little thing.

Find Community Resources

Most people are not aware of the communities that offer free and low-cost services that can help you reduce your expenses big time, especially if you belong to low-income families. These are usually:

• Free health check-up camps which are mostly organized by local clinics and NGOs. 
• Different free skill training programs by the government to help you learn new skills, if you can’t afford paid ones. 
• Food banks for the community, which provide low cost groceries or even for free sometimes. 
• Public transportation discounts, where you can get some percentage off, when you use public transportation.  
• Use public libraries for study, that way you don’t have to purchase new books. 

You can call a toll free number, like 211 for the U.S. or visit the local government websites to find the community resources nearby. 

Get the Whole Family Involved 

Involving your whole family in saving can help you reach your goals faster and build a good habit for a better lifestyle, especially when you belong to a low-income family. 

If you have kids, talk to them about budgeting in a way they understand. Teach them the difference between needs and wants, and how to make smart choices with money. 

When the whole family works together, it’s easier to save money and manage your budget. Try to make this a weekly habit with your family. 

Conclusion

As you saw above in the article, budgeting on low-income doesn’t have to be difficult if you follow a few key steps such as, understanding and tracking your income regularly, separating needs from your wants, building an emergency fund, and making budgeting a regular habit in your family. 

By doing this, you’re not only managing your hard earned money to meet your goals for the future, but also saving for a brighter and much more secure future than now. 

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Budgeting Tips for Low-Income Families Related FAQs

What is a budget, and why do I need one?

A budget is a plan for how and where you spend your money. It helps you make sure you have enough money for important things like food, rent, bills, childcare and transportation. 

How do I start making a budget if I have a low income?

Write down how much money you earn each month and what you spend it on, including every little thing. Then see where you can cut back and save more. 

How can I save money when I barely have enough?

Even a very small savings matters when you’re going through a tight budget. Start by saving a little each week, like stop ordering food from outside and cook at home or stop buying store-brand items. 

What are the most important things to spend money on first? 

Always focus on your needs first, such as rent, bills, transportation, childcare, groceries, medical and other emergencies etc., and then think about your wants, like dining out or shopping.

How can I stick to my budget every month?

Always try to track your budget weekly or monthly, set clear goals about savings and future, and remind yourself why budgeting is important. 

You can use tools like mobile applications or notebooks to write down your budget.